The following list is a selection of transactions from Trafalga, Inc.’s business activities during 2003, the first year of operations.

Received $50,000 cash for capital stock. Paid $5,000 cash for equipment. Purchased inventory costing $18,000 on account. Sold $25,000 of merchandise to customers on account. Cost of goods sold was $15,000. Signed a note with a bank for a $10,000 loan. Collected $9,500 cash from customers who had purchased merchandise on account. Purchased land, $10,000, and a building, $60,000, for $15,000 cash and a 30-year mortgage of $55,000. Made a first payment of $2,750 on the mortgage principal plus $2,750 in interest. Paid $12,000 of accounts payable. Purchased $1,500 of supplies on account. Paid $2,500 of accounts payable. Paid $7,500 in wages earned during the year. Received $10,000 cash and $3,000 of notes in settlement of customers’ accounts. Received $3,250 in payment of a note receivable of $3,000 plus interest of $250. Paid $600 cash for a utility bill. Sold excess land for its cost of $3,000. Received $1,500 in rent for an unused part of a building. Paid off $10,000 note, plus interest of $1,200. 5+ 2 O20 © gah = General Ledger Software } pos Ra eR ee 204 See arek pe Required: — Set up T-accounts, and appropriately record the debits and credits for each transaction directly in the T-accounts. Leave room for a number of entries in the cash account. N Prepare a trial balance. = Prepare an income statement for the period. (Ignore income taxes and the EPS computation.)